March 13, 2009
Obama's energy policy will increase dependence on foreign oilBy Seldon B. Graham, Jr.
President Obama’s biofuel and oil policy is on a collision course to a national catastrophe. Yet, the alarms are not sounding and the red lights are not flashing.
Secretary of Energy Steven Chu is not warning Obama that his oil policy will increase our dependence on foreign oil. Lisa Jackson, Administrator of the Environmental Protection Administration, is not alerting the President that his oil policy will increase carbon dioxide emissions. National Security Advisor James L. Jones is not cautioning the President that his biofuel and oil policy increases the US vulnerability to a Second Arab Oil Embargo. Christina Roner of the Council of Economic Advisors is not counseling Obama that his biofuel policy continues a 30-year-old blunder wasting taxpayers multiple billions of dollars annually. Secretary of Agriculture Tom Vilsack is not warning the President that his biofuel policy is doomed to failure because of the impossibility of providing sufficient bio products. Secretary of the Interior Ken Salazar is not advising Obama that his tax on oil will destroy proven US oil reserves.
Why aren’t the alarms sounding and the red lights flashing? It is probably because of the lack of knowledge and experience on these specific subjects by the new appointees. All must be given benefit of any doubt that their duty and loyalty lies with the United States of America instead of their political party or its head.
President Obama’s energy policy is to eliminate our dependence on foreign oil imports by eliminating oil and replacing oil with alternative renewable “clean” biofuel. That sounds good in speeches. It is quite impressive to all those who know little about oil or biofuels, which includes the majority of the public. The devil, of course, is in the details which no one seems to have investigated.
Ethanol subsidies began in 1979. Ethanol has had 30 years of taxpayer-assisted experience. Ethanol is the only “feasible” alternative renewable biofuel in the competition. All other biofuels lack the production potential that ethanol has.
According to the latest data from the Renewable Fuels Association, ethanol production is currently averaging 0.60 million barrels per day. At the subsidy of 51¢ per gallon, this amount of ethanol production costs taxpayers over $4 Billion in 2008.
The ethanol future looks much worse. The “Energy Independence and Security Act of 2007” required maximum ethanol production of 2.35 million barrels per day by 2022. But, this amount of ethanol production will require the entire corn crop in the US, every kernel of corn.
According to Professor Chris Hurt of Purdue, in 2006 the US had about 79 million acres of corn. Professor Richard Meilan of Purdue estimates that one acre of corn will produce 450 gallons which is 10.7 barrels of ethanol. Using all of the corn crop land in the US for ethanol — no movie popcorn, no corn syrup sweetener, no bourbon, no tortillas, no grits, no corn to eat at all — ethanol production can reach only 845 million barrels in 2022, or 2.31 million barrels per day.
Department of Energy data shows that the US is producing 4.95 million barrels of oil per day and importing 9.00 million barrels of foreign oil per day. Including the 0.60 million barrels of ethanol per day, our current oil demand is 14.55 million barrels per day.
US oil production has been declining since 1985. This decline is almost ruler straight. By 2022, it is estimated that US oil production would be approximately 3 million barrels per day. Therefore, in year 2022, ethanol production is expected to be 2.3 million barrels per day and US oil production is expected to be 3.0 million barrels per day, for a combined total of 5.3 million barrels per day. That leaves a shortfall of 9.25 million barrels of oil per day from our current oil demand — to be filled by foreign oil imports. Even assuming there is no increase in demand in the next 13 years, foreign oil imports will be greater in 2022 than they are now. Attention Secretary Chu!
A Department of Energy study made by Decision Analysis Corporation shows that ethanol emits 28.7 grams more carbon dioxide per mile driven than gasoline. Ethanol is not the “clean” biofuel that President Obama thinks it is. The Department of Transportation estimates that 2,656 billion vehicle miles were traveled in the US last year. Ethanol would put millions of tons more carbon dioxide into the atmosphere as compared to gasoline. Attention Administrator Jackson!
In 1972, foreign oil imports were 811 million barrels, 19% of demand, the year before the devastating Arab Oil Embargo. Currently, foreign oil imports are at a rate of 3.3 billion barrels annually, 62% of current demand, and are expected to increase in the future. Attention General Jones!
Ethanol subsidies of 51¢ a gallon are $21.42 per barrel. In 2022, when ethanol production is expected to reach its maximum of 845 million barrels annually, the taxpayers would pay over $18 billion dollars for this 15.8% of the current oil demand. Clearly, taxpayers would not be getting a reasonable bang for the buck. Attention Economist Roner!
The United States just has so much crop land. It is a finite number of acres. In 2006, Professor Hurt estimated that it was 79 million acres for corn. Encroachment from development and improvements may have eaten away at some of this. There is an absolute limit on the maximum production of an annual crop such as corn which is determined by acreage. This limit, of course, can be reduced by flood or drought. Removing corn from the food supply by reaching maximum ethanol production is an extremely serious related issue. Attention Secretary Vilsack!
All oil wells decrease in production. Each oil well has an “economic limit” defined as the number of barrels of oil per day which is required to keep the well from losing money. This economic limit determines the life of the well and the proven oil reserves for the well. The equation for the economic limit of an oil well is the daily operating cost divided by one minus the tax times one minus the royalty times the oil price. The economic limit of an oil well is determined by entering the daily operating cost, tax, royalty, and oil price into the equation. A higher tax on oil raises the economic limit, decreasing the life of the well, resulting in decreased proven oil reserves. With an equivalent loss occurring in each of the half million oil wells in the United States, the loss in proven oil reserves to the United States from an increase in tax on oil can be in the billions of barrels. Attention Secretary Salazar and Economist Roner!
Why isn’t there outrage, if not rioting in the street, over this oil and biofuel policy of the Obama administration? Is it because the domestic oil industry -- what little is left after Jimmy Carter -- is cowering in the corner in fear, waiting for the coup de grace?
The American Petroleum Institute (API) is the only national organization representing the domestic oil industry. Jack Gerard, the President and CEO, has never worked in the oil industry. He came to the API from the American Chemistry Council last year. He has been in Washington since 1981. The API runs expensive television advertisements telling the public that everything will be fine in the future.
Everything is not going to be fine in the future under President Obama’s biofuel and oil policy. President Obama’s biofuel and oil policy is on a collision course to a national catastrophe. Among a great many other critical problems, it will cause an increase in our dependence on foreign oil.
Seldon B. Graham, Jr. is Associate Editor, US of Energy Tribune.